In-game spending has become a key revenue source for Chinese gaming companies and a new driver for the industry’s growth. Players have also found satisfaction and pleasure paying for ‘assets’ in the virtual world with real-life money. Chai Hua reports from Shenzhen.

Lining up bumper-to-bumper under the red-hot sun or cutting in line in search of dream homes is not big news in the Chinese mainland media.

But new “property projects” have now made their mark and, as quick as a flash, a total of 130,000 “houses” have been snapped up. The real estate mania, however, isn’t in real life, but in a virtual world created by an online game producer. Since then, new “houses” have been released from time to time to millions of players, who pay for the “property” with up to thousands of yuan.

In-game purchases, which refer to items or points a player can buy for use within a virtual world to improve a character or enhance the playing experience, are gaining traction among video game players, the number of whom has reached a quarter of the world’s population.

As the business model of games has changed tremendously in the past decades, in-game spending has become a key revenue source of gaming companies and, looking ahead, such virtual assets could become an essential part of personal wealth.

In-game goods are no longer limited to weapons or energy in esports or battle games. They’re more social and diversified and also less ranking-related, making the average player more willing to pay for the games, rather than their being just a lure for addicts or professional players’ investments.

In the online game JX Online 3, developed by game producing heavyweight Kingsoft Office Software, the in-game goods include a lovely bonsai, a pair of comfortable cushions and an exquisitely lacquered screen. In the past 11 years, millions of players have been drawn to the traditional Chinese martial arts world, and the game released the version of home community for the first time in May.

One piece of “land” covering 4,032 square meters at a popular “zone” (server) drew a bidding price of up to 1,150 golden bricks, the in-game currency, or equal to more than 10,000 yuan (US$1,430), while affordable “land resources” are also provided at prices ranging from dozens to hundreds of yuan. 

From cherry-picking locations and intensely competing for the best ones, to contract signing and decoration design, the game play resembles buying a brick-and-mortar house in the real world. One of the game’s major breakthroughs making it distinct from other life simulation games is that it establishes a community of real people. Neighbors are human players behind the screen, and owner committees of its hundreds of residency zones are organized on social instant messaging platforms, such as QQ and WeChat.

University student Wang Wanqian kept an online diary to post the decoration update of her “house” of JX Online 3 and her daily life there. “The ‘house’ cost me just 40 yuan, but it’s really important to me because I give it a lot of thought and attention,” she said.

Raising wisterias and lotuses, enjoying the lake view on the balcony or exploring a new section of a mountain with her sister, Wang spends two to three hours a day on the game, and “time” in the virtual world needs to be paid for with real-life money. She said she cultivates flowers on her land in exchange for in-game currency so she can buy more decorations for her “home”, adding tremendous extra value to its original price.

Dong Zhen, a gaming analyst at internet consultancy Analysys, believes the number of people owning in-game assets is increasing. “On the one hand, new segments of players are brought into the market and, on the other, players’ willingness to spend on entertainment, including in-game goods, is increasing,” he said.

He estimates the consumption potential of existing users is still large and that in-game spending is the new driver of China’s gaming industry.

The sector’s user size has been sluggish over the year. In the first quarter of 2020, only 2 million new players in China jumped on the bandwagon — a slight 0.31 percent growth over the last quarter of 2019 — according to a joint report by the Game Publishing Committee of the China Audio-Video and Digital Publishing Association and market research firm International Data Corp.

But the growth is still seen as stagnant, considering the coronavirus pandemic has forced millions of people to stay at home. However, the industry’s revenue had surpassed 73.2 billion yuan in the first three months of this year, having surged more than 25 percent quarter-on-quarter. One aspect to be noted is that female players’ contribution to the sector’s revenue soared to 19.2 billion yuan — a remarkable growth of about 50 percent over the last quarter.

Tom Wijman, an analyst at video-game research firm Newzoo, believes players with a strong engagement tend to spend more, and the element has been highlighted by the world’s well-known revenue-generating games, such as Fortnite and League of Legends. The free-to-download game Fortnite was making an average of $1 million every day from players, according to analytics from Sensor Tower. Wijman also found that the share of in-game revenues among all kinds of incomes is about 77 percent.

It has become the dominant monetization model for mobile and PC gaming, which are mostly free to play, and is quickly changing how console games are monetized, he noted.

Although players are seeing virtual assets as more important in their lives, real-life consumption is different in some respects. For example, the “houses” in the JX Online 3 game have virtual developers who are actually game producers, and they control the rules and land resources. In real life, real estate developers need to bid for residential land, and land resources are limited.

The unbalanced power system has given rise to conflicts in some games. Hong Kong-listed internet giant NetEase recently released a new treasure system in its online game Immortal Conquest and drew a pool of complaints from tens of millions of players. Confronted by the risk of devaluation of their accounts and other in-game assets, some of these gamers even decided to boycott the game.

With the rapid expansion of in-game assets and consumers’ growing awareness of protecting themselves, China’s new Civil Code, which was passed by the National People’s Congress in May and is due to come into force in January, explicitly protects virtual assets. The People’s Insurance Company Group of China and Ping An Insurance have launched in-game asset insurance products in cooperation with game producers, but trading and protection platforms of such assets are still insufficient.

A report by Netherlands-based Newzoo, which claims to be the world leader in games, esports and mobile intelligence, says the market has room to grow as the number of gamers is on track to exceed 3 billion globally.

Contact the writer at grace@chinadailyhk.com